New Delhi: Two months after a run-in with US giant General Electric Co. (GE) over the manufacture of diesel locomotives, Indian Railways has decided to phase out diesel engines in the next five years and switch entirely to electric ones.

By phasing out diesel locomotives, the national transporter will save around Rs11,500 crore annually, railway minister Piyush Goyal said at a meeting of the executive committee of the industry lobby group Federation of Indian Chambers of Commerce and Industry (Ficci).

“We have planned to switch all trains to electric-driven in the next five years," Goyal said on Tuesday. “The diesel locomotives will be used for back-up purposes in the yards."

The minister’s statement could raise renewed questions on GE’s Marhaura diesel locomotive project in Bihar, where the company is setting up a factory at an estimated cost of Rs2,052.58 crore, with limited equity contribution by the ministry of railways. Under the original plan, over a 10-year period, GE was to supply 1,000 diesel locomotives of 4,500 and 6,000 horsepower with high-level performance guarantees.

Goyal, at a meeting on 7 September, had asked Indian Railways to review the GE project given plans for complete electrification of its network by 2022. The move prompted GE to issue a strongly worded statement that scrapping the project would have a “serious impact on job creation and skills development and cause the government to incur substantial costs."

In October, Goyal clarified that the project was on track and if required, a diesel locomotive manufacturing facility could be upgraded to make electric locomotives. He added that if Indian Railways’ requirements change, GE will be informed about it.

Spokespersons for GE didn’t respond to phone calls and text messages.

Goyal also said production of Linke-Hofmann-Busch (LHB) coaches has been increased as part of plans to improve railway safety. A high-level safety review committee had in 2012 recommended switching over from coaches made at the Integral Coach Factory to LHB coaches, based on German technology, that have better safety features. “I have asked the rail coach factories to develop the LHB coaches and also double up their production at Rae Bareli coach factory, which currently manufacturers 1,000 coaches annually," said Goyal.

He added that the Uttar Pradesh government had already been approached for allotment of 200 acres for the Rae Bareli coach factory’s expansion.